HP Dumps Touchpad, Spins Off PC Division

Hewlett-Packard will be dumping its Touchpad tablet computer and phones after dismal sales at Best Buy and other retailers, the company announced on Thursday.

The news comes after speculation all Thursday that the company is in talks to purchase Autonomy Corp. for $10 billion and that it would spin-off its PC computer division, which the company confirmed to The Wall Street Journal.

The decision to end its webOS Touchpad line shows just how poorly the product has fared in the market. On Wednesday, Best Buy released that it had 200,000 Touchpads lying around its stores and was considering sending them back to the company. The company claimed it had only sold 25,000 of the tablets after ordering 275,000 of them in July.

The tablet originally sold for $499 as an alternative to Apple's iPad but was unable to generate interest, forcing HP's hand to cut the product loose. The company acquired the rights to webOS after it purchased Palm Inc. for $1.2 billion in April 2010. This move possibly represents a major financial hit for the company.

The stunning end of the Touchpad overshadows its decision to spin-off its PC division and purchase British software company Autonomy for $10 billion. The purchase of Autonomy was in hopes to boost its enterprise software business, but it wasn't expected to make a short-term positive impact, according to one analyst.

We believe the potential divestiture or spin off of HP's PC business is a long-term positive, however, this will not change the near-term challenges that the leading IT players highlighted this week, Ticonderoga Securities analyst Brian White wrote in a note.

HP confirmed its intentions to purchase Autonomy to The Wall Street Journal, as its enterprise software business has more room for potential profits than its PC division.

The report came a few hours before HP's earnings announcement that lowered yearly profit estimates. The company met quarterly earnings expectations, but its annual estimates fell far below analyst expectations of $129 billion.